Day after lower AUM number, Bajaj Finance shares tumble 8%

Bajaj Finance acquired 3.1 million new customers (v/s 2.6 million acquired in Q2FY23). The new customer acquisition run-rate was healthy in Q3FY23.

Shares of Bajaj Finance tumbled over 8 per cent to Rs 6,032.25 on the BSE during Thursday’s intraday trade, and closed the day at Rs 6,099.85, down over 7 per cent compared to the previous close.

Analysts said the sharp decline in the consumer finance company's stock was triggered by weaker-than-expected growth in assets under management (AUM) during the December quarter, coupled with concerns around deepening of competition from existing fintech players and new players (Jio Fin). 

BAF's AUM grew by 27 per cent year-on-year (YoY)/6 per cent quarter-on-quarter (QoQ), to Rs 2.30 trillion as of December 31, 2022.

Global brokerage CLSA said that a 6-per cent sequential growth in AUM, against its expectation of 7.5 per cent growth, in a seasonally strong quarter suggests likely market share erosion by the NBFC.

It has a 'sell' rating on the stock with a target price of Rs 6,000.

Bajaj Finance, which reported around 37 per cent CAGR growth in AUM in the last decade, has been reporting 25-30 per cent growth in the AUM post the Covid-19 pandemic.

"The growth differentials has also narrowed due to faster loan growth acceleration taking place at banks and other NBFCs. Thus, we believe the stock is seeing valuation multiple de-rating," Rahul Malani, banking and NBFC analyst - fundamental research at Sharekhan added.

In the third quarter for the 2022-23 financial year (Q3FY23), the firm’s AUM grew 6 per cent QoQ or by approximately Rs 12,500 crore.

AUM growth suggested that disbursements were strong across product segments, but remained lower than expectations, said Motilal Oswal Financial Services.

Among key highlights, the brokerage, which has a ‘buy’ rating on the stock, said that the new customer acquisition run-rate was healthy in Q3FY23. 

Bajaj Finance brought in 3.1 million new customers (against 2.6 million in Q2FY23). Total customer franchise stood at 66 million, up 19 per cent YoY.

New loans booked during the quarter witnessed highest growth, at 7.8 million against 7.4 million in Q3FY22. The customer franchise increased by 3.1 million in Q3FY23, to 66 million against 55 million in Q3FY22. The company’s liquidity position continues to remain strong with net liquidity surplus of Rs 12,750 crore.

With Thursday’s decline, Bajaj Finance has underperformed the market in the recent past. In the past three months, the stock has slipped nearly 20 per cent, as compared to 4.4 per cent rise in the S&P BSE Sensex. In the past one year, it has declined 19 per cent, as against 0.67 per cent gain in the benchmark index.

That said, analysts believe BAF offers strong earnings growth and longevity of the franchise from long-term perspective.

"Currently, the stock trades at 6.4x 1-year forward book value. BAF:s competitive moats are difficult to replicate, along with strong execution capabilities, underwriting, data analytics. We believe BAF is poised to deliver strong sector-leading RoA of 4.7 per cent/4.8 per cent and RoE of 22 per cent/23 per cent in FY24/FY25," said Malani of Sharekhan.